If you’re a UK expat living in Australia, it’s likely you will have come across the financial acronym “QROPS” and wondered what it meant.
To be honest, even once you find out that it stands for “Qualifying Recognised Overseas Pension Scheme” you might be none the wiser, particularly when it comes to your own financial planning arrangements.
However, if you have made the move from the UK to Australia and have retained pension assets back in the UK, then a QROPS is really something you should be aware of.
We thought it would be helpful to set out some of the most common questions we receive about QROPS. The answers should help you understand how they work, and why one could be an integral part of your retirement planning.
1. What is a QROPS?
Put simply, a QROPS is an overseas pension scheme that HMRC has authorised, into which – subject to eligibility – you can transfer your retained UK pension assets.
It means that if you are living abroad – in this case in Australia – and you are planning to retire, you can access your retirement fund under the tax jurisdiction of the country you’re living in.
Additionally, subject to eligibility, you can move your private or company UK pension to an Australian super, and gain valuable flexibility as well as potential tax advantages in the process.
2. Do I have to use a QROPS if I move to Australia?
If you’re an Australian resident with UK-based pension assets, you have two options:
- You can leave your fund where it is and access it in the UK from Australia
- You can transfer it into an Australian-based QROPS.
The decision will be dependent on your long-term retirement plans.
If you’re planning to return to the UK to retire then, even though you may be living in Australia for some time, it may well be advisable to leave your pension where it is, so you can draw from it when you are back in the UK.
Alternatively, if you plan to remain in Australia for the rest of your life, transferring your pension(s) into a QROPS might be well worth considering.
3. Can I transfer all my UK pensions to a QROPS?
As well as ensuring that the scheme you are looking to use is a QROPS, you will also need to be aware that not all UK schemes can be transferred.
For example, pending advice supporting a transfer, you will normally be able to transfer assets you have in:
- An occupational pension scheme
- A defined benefit (DB) scheme
- A personal pension.
However, you will not be able to transfer any of the following:
- Your UK State Pension
- Any public sector unfunded pension, such as NHS or armed forces pension schemes
- A scheme pension that you are already receiving benefits from, including an annuity.
You can have your UK State Pension paid directly into an Australian bank account, but you should be aware that your pension will not increase in line with inflation once it is in payment.
Find out more: QROPS and SMSF: why they are important if you’re transferring your UK pension to Australia
4. Is there a limit on the amount I can transfer to a QROPS?
The maximum amount you can transfer to a QROPS is determined by your “Overseas Transfer Allowance” (OTA), which is set at £1,073,100 in the 2024/25 UK tax year.
Please be aware, that you will be subject to a 25% tax charge on the funds above your OTA if you exceed this amount.
It’s also important to be aware that you may need to phase your transfer because funding rules in Australia limit the amount you can contribute or transfer into a super account in any one Australian tax year.
These are limited by the annual Non-Concessional Contribution (NCC) cap, which, since July 2024, is AUD $120,000.
However, you may be able to make use of the Bring-Forward provisions, which can allow you to also use the next two years’ worth of your NCC cap. This will allow you to currently contribute up to AUD $360,000.
5. What are the benefits of transferring my pension to a QROPS?
If you are intending to retire in Australia, there are several benefits related to transferring your accrued UK pension funds to a QROPS. These include:
- An advantageous tax position whereby you will have enjoyed tax relief on your contributions into your pension fund, and will then pay no tax on the income you draw from your super.
- The ability to draw a retirement income in the same currency as the country you will be retiring in, removing any currency exchange risk.
- Pension assets may be able to be passed on to your heirs without Inheritance Tax (IHT) being chargeable. From April 2027, pensions are set to be included in a person’s estate for IHT purposes in the UK, meaning your beneficiaries could pay tax on the sum they inherit if funds remain in your UK pension.
Clearly your personal circumstances will dictate how beneficial transferring your pension to a QROPS will be, and we would strongly recommend that you obtain expert advice before committing to a transfer.
6. What will happen to my QROPS when I pass away?
Death benefits from your super fund will not normally form part of your estate when you pass on, and the outstanding value of your fund will usually be paid to your spouse or civil partner if you have one.
However, if you have complicated arrangements, it’s advisable to make a legally valid declaration stating who the benefits should pass to. However, in some circumstances a non-binding nomination may be more appropriate. Again, we would recommend you get expert advice on this.
Find out more: Why it’s important to understand how death benefits would be paid on your super fund
New tax changes: Transferring UK pensions to Australia could protect your loved ones
Getting expert advice is essential
Even if you are able to transfer your pension funds to a QROPS, it’s particularly important to be aware that it may not be the right thing for you, depending on your individual circumstances.
The transfer process can be complex, and any mistakes could be irreversible and result in you facing a tax charge of up to 55% or taxation at your marginal rate of tax, which could be as high as 47%.
By taking advice from a specialist, you can select the right scheme, plan how you will take your income in order to reduce your tax liability, and make the most of the flexibility of a QROPS.
Here at bdhSterling, we have a wealth of experience in helping clients transfer pension assets from the UK to Australia. We are dual-licensed to provide advice in both countries.
We’d be more than happy to offer a free initial consultation to talk you through your options.
Get in touch
If you want to discuss any of the issues you’ve read about in this article, please get in touch with us.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only, it does not take into account your personal objectives, financial situation, or needs. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances.
All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.
